Rail fares to rise by up to 5.6% in January

Published: 19th August 2014

Rail.co.uk looks at the political background to the announcement

The July UK inflation figure was announced as being 2.5% and under the rail franchise agreements, train operators can increase Regulated fares by inflation plus 1%. This instruction by the Department for Transport, (DfT) allows in theory, a 3.5% overall increase but some could rise by 5.6%.

Train operators can increase individual fares by up to another 2% so long as this is balanced out by much lower increases on others. This is known as ‘flexing fares’ which is included in franchise agreements with the DfT. The new fares come into effect at the start of January but Season ticket holders can beat the increase by paying for their ticket before the implementation date.

The January 2015 fares’ increase is particularly political as comes into effect under 20 weeks away from the General Election so we can expect some Government intervention to reduce the increase as with this year’s price rise.

Railway politics

If fares are artificially suppressed as promised by the Chancellor, in reality how much difference will it make to what is deemed to be a largely captive market?

Many commuters and business travellers now use traveling time as work time given the mobile connectivity which will get better in the next few years. Many trains are full and if fares are held or reduced, more passengers will try and travel but not be able to get a seat creating more problems.

More problems are likely to occur as the announcement only apply to English fares. The Scottish and Welsh Assemblies have the power to set their own fare levels creating a huge, complex and expensive system to run.

The newest ‘railway quango’, The Rail Delivery Group, say that the fares’ formulae has existed for a decade, customer satisfaction is high and that rail usage has doubled in last 10 years and will continue to do so for a variety of reasons.

Flexible fares?

How does the mechanism for flexing fare increases work? Firstly, it is not clear if the increase is by the amount of what are known as passenger flows or by receipts. For example, East Midlands Trains (EMT) operate the Leicester to London service, a busy key lucrative flow earning millions.

Compare this to Leicester to Corby for example which may be a tiny flow so could EMT increase the former by 4.5% and keep fares the same on the latter fare to balance the average percentage increase but in reality generate a lot more income?

Another example could be London Midland services between Bedford and Bletchley which is a rural route and fares are low. But from Bletchley to Euston is a busy flow so this could be increased by the 5.6% whereas the rural flows eastwards from Bletchley could remain unchanged with negligible effect on revenue. But overall, does this count as balancing each other out creating the average increase?

Who benefits from the increases?

Where does the extra farebox revenue go to? The DfT to help pay for the massive investment the railways are in the midst of and official figures state that only 3% of fare income is retained as profit by train operators.

Labour has said that it will make it a ‘Legal Right’ to be sold the cheapest fares but this will result in huge queues at ticket offices and would this include segmenting your journey to take advantage of special offers? For example, a journey from Glasgow to London could be made cheaper by having several tickets, maybe technically splitting your journey at Crewe or York depending on which route is taken.

They also claimed that the Thameslink project was a Labour scheme but was kick-started under a different Government and supported by all political parties. In fact, that project was started in the late 1980s and has succeeded despite the many general elections since then irrespective of the winners!

Travel tips

Make sure you travel on the correct train that your ticket entitles you to otherwise it can become very expensive. Avoid ticket machines at stations because they do not always offer the full range of tickets. You can also split your journey into segments and buy several cheaper tickets for your journey but this takes time and a good understanding of train operators and routes.

There is an argument that fares are expensive, which in many cases they are if you travel at peak times or cannot book ahead. But equally, there are many bargains to be had if you can book in advance, as with flying or booking holidays, there are bargains to be had. In most instances you need to be able to book using the internet and there are several sites dedicated to finding cheaper tickets such as red spotted hanky.

They said;

Shadow minister for transport Mary Creagh said: "David Cameron has failed to stand up for working people struggling with the cost-of-living crisis. "He's allowed train companies to sting passengers with inflation-busting fare rises of over 20% since 2010, costing them hundreds of pounds." She said the Conservatives had "botched" the privatisation of the railways.

"Our rail fares are among the highest in Europe. Rail passengers rightly feel ripped off when they are uncertain if they paid the lowest fare." She said Labour would impose a "strict cap" on rail fares, removing the "flex" arrangement.

Rail or road travel?

But of course, the cost of taking the train to work is a "huge part" of living costs but for rail commuters the alternative is to drive - and it is ironic that upwards motoring cost pressures have helped keep inflation steady rather than it reducing.

All rail users are now, or will over the next few years see the benefits of investment across the network even if it means a few years of inconvenience because of upgrade work.

Rail safety is the best in Europe and up with the best in the World, and the old phrase safety id no accident is a truism but again, safety has financial implications, it has to be paid for.

Whatever the rights and wrongs of fare increases, be sure there will be more headlines on this subject as decisions are made by politicians.

It all has to be paid for somehow!

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